Stablecoin issuer Tether has announced a partnership with blockchain forensics firm Chainalysis to develop a tool for monitoring secondary market activity.

Tether is planning to enhance its oversight of the USDT market, as the firm has signed a partnership agreement with Chainalysis, a New York-based blockchain intelligence firm. In a blog announcement on May 2, Tether said the solution crafted by Chainalysis will serve as a “proactive source of intelligence” for compliance investigators, enabling them to “identify wallets that may pose risks or may be associated with illicit and/or sanctioned addresses.”

“Our collaboration with Chainalysis marks a pivotal step in our ongoing commitment to establishing transparency and security within the cryptocurrency industry.”

Tether CEO Paolo Ardoino

The tool developed by Chainalysis includes features such as sanctions monitoring, providing a list of addresses and transactions involving sanctioned entities.

Additionally, it categorizes USDT holders by type, distinguishing between exchanges and darknet markets. Moreover, the tool also offers an illicit transfers detector, allowing for the identification of transactions “potentially associated with illicit categories like terrorist financing,” Tether added.

The collaboration comes amid concerns raised by U.S. senators regarding the potential misuse of Tether’s stablecoin by countries like Russia, Iran, and North Korea to circumvent Western sanctions.

As Coin Insider Daily reported earlier, allegations surfaced that USDT enabled Russian entities to bypass sanctions and procure components for drones and other equipment abroad. As a result, senators questioned whether the Department of Defense and the Biden administration support the Treasury Department’s request for expanded powers.